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A former City of Detroit creditor is suing for more time to devise a plan for reusing the site of now-empty Joe Louis Arena, and perhaps build something there other than a big riverfront hotel.

A development firm controlled by the former creditor, New York-based Financial Guaranty Insurance Co., on Monday filed the lawsuit, which seeks a two-year extension to the fall 2017 deadline for it to submit a redevelopment plan to the city for The Joe.

The firm says it needs the time extension because, among other reasons, the development it was contractually obligated to build on the arena site — a "first-class" hotel with up to 30 floors and at least 300 rooms — may no longer be the best idea. Numerous other Detroit hotels have opened recently and the location isn't so great, the firm says.

Financial Guaranty says city officials refused its requests for two years of extra time, and would only agree to 180 days. The lawsuit was filed in U.S. Bankruptcy Court in Detroit.

Derek Donnelly, senior managing director for Financial Guaranty, told the Free Press that he didn't know why city officials would not grant the extra time.

"We had what we thought was a cooperative, productive relationship with the city," Donnelly said in a phone interview. "Then all of the sudden something changed, and we’re not sure what it is. We are very frustrated."

Financial Guaranty accepted future ownership and development rights to the Joe Louis Arena property in exchange for swallowing big losses during Detroit's 2013-14 municipal bankruptcy. It ultimately got roughly 13 cents on the dollar for its $1.1-billion claim against the city.

The city's top lawyer, Lawrence Garcia, said in a statement that "the city believes this suit has no merit and will respond appropriately to the complaint in court."

The steps to the Gordie Howe entrance of the Joe Louis Arena in downtown Detroit in February 2018.(Photo: Ryan Garza, Detroit Free Press)

Under the 3-year-old development deal between the city and Financial Guaranty, the city has until May 1 to start demolishing Joe Louis Arena or, at the minimum, begin "staging for the demolition."

The city then has a full year to finish tearing down The Joe at its own expense, although with help from up to $6 million in state loans.

Once the arena is gone, the city is to hand over the 5-acre site (plus that of the nearby 3,200-space Joe Louis Arena garage) to the former creditor.

Numerous downtown Detroit hotel projects have opened or been announced since the city signed the Joe Louis Arena development deal and emerged from Chapter 9 bankruptcy in late 2014, including the new Detroit Foundation Hotel across from Cobo and the future Shinola Hotel on Woodward.

Those new projects would mean competition for any arena-site hotel. In addition, Donnelly said the arena land isn't as conveniently located for a hotel as once thought.

"The back of Cobo (Center), with a somewhat access-constrained site, is probably not optimal for a hotel," he said. "If you were trying to get to the central business district, it’s not the easiest walk."

That other bond insurer, Syncora, received ownership of the old Detroit Police Department headquarters at 1300 Beaubien near Greektown to help settle its claims. A Syncora subsidiary recently teamed up with Dan Gilbert's real estate firm to redevelop the empty building.

CLOSE

A quick look at how the Wings' and Pistons' seating and locker rooms differ at their new arena. Video by Ryan Ford/DFP

The Wings played their final game at Joe Louis Arena last April 9. They now play at the new Little Caesars Arena.

Editor's note: An earlier version of this story should have said the lawsuit was filed in U.S. Bankruptcy Court in Detroit.